Could AMD Be the Nvidia of 2025?

When it comes to semiconductor stocks, it's virtually impossible not to think of Nvidia. Over the last two years, the company has become the undisputed leader among chip stocks, and with that, is swiftly emerging at the forefront of the pack among artificial intelligence (AI) companies more broadly.

In my eyes, though, investors have been so eager to get in on the action with Nvidia that they've essentially forgotten about other opportunities in the chip realm. With 2024 coming to a close, I'd encourage investors to take a look around and consider what under-the-radar opportunities could be looming.

I'm going to make the case for why an investment in Advanced Micro Devices (NASDAQ: AMD) looks especially enticing right now. Could AMD be next year's Nvidia? I think so.

Is Nvidia actually that far ahead of AMD?

On the surface, it would appear obvious that Nvidia is miles ahead of AMD in the AI marathon. Over the last 12 months, Nvidia has generated a mammoth $113 billion in revenue -- almost fivefold compared to that of AMD.

However, taking a look at where this revenue stems from may change how you think about AMD's trajectory in comparison to its larger cohort.

In the table, I've broken down the annual revenue growth rates for each of AMD's and Nvidia's respective data center businesses:

Data Source: Investor relations.

Over the last year, Nvidia's data center businesses has decelerated significantly. At the same time, AMD's data center business has evolved from essentially nothing to reaching more or less the same rate of growth compared to Nvidia.

Don't get me wrong -- I'm not going to posit the notion that Nvidia is in trouble. It's hard to make a bear case on a company that's posting growth in excess of 100% every quarter.

But my broader point is that even though Nvidia is larger than AMD, that doesn't necessarily make it a better investment opportunity. I'm going to detail how AMD has built such a formidable competing data center business and explore why 2025 could be a milestone year for the company.

Image Source: Getty Images.

Why 2025 could be a pivotal year for AMD

Much of the reason why Nvidia experienced such enormous growth in its data center business stems from the fact that the company had virtually no competition in the graphics processing unit (GPU) landscape until recently. With the successful launch of AMD's MI300 accelerator, Nvidia's first-mover advantage is finally facing some headwinds.

Now, you may counter my point by arguing that Nvidia's next-generation Blackwell GPU architecture is going to help dissipate any chance of AMD dethroning the chip king. Well, consider the fact that many of Nvidia's own customers, including Microsoft and Meta Platforms, are also using AMD's MI300 GPUs.

On top of that, remember that these big tech giants, in addition to Alphabet and Amazon (both of which are also Nvidia customers), are also investing heavily into the development of their own in-house chips in an effort to migrate away from an overreliance on Nvidia.

Lastly, keep in mind that AMD is also developing a successor GPU to the MI300 called the MI325X -- slated to launch in 2025. Moreover, the company's MI400 architecture is targeting a launch date sometime in 2026.

My point? I don't see Nvidia's Blackwell launch as much of a threat to AMD at all. AMD is innovating at an unprecedented pace, and considering investment in AI infrastructure is expected to rise for the next several years, I see the launch of the MI325X and MI400 as catalysts that can help AMD acquire incremental market share away from Nvidia.

Is AMD stock a buy right now?

At the time of this writing, AMD trades at a forward price-to-earnings (P/E) multiple of 29. By comparison, Nvidia's forward P/E ratio is currently 34.

With the Blackwell launch imminent, I can't help but feel that expectations surrounding Nvidia will creep higher. If the company fails to meet investor expectations, there could very well be a panic-driven sell-off in the stock.

Meanwhile, given AMD's meaningfully discounted valuation compared to Nvidia, I think investors are overlooking its new lineup of GPUs over the next two years. The existing footprint from the MI300, combined with next year's launch of the MI325X to compete head-to-head with Blackwell, should help AMD continue making headway against Nvidia -- in particular, from its own customer base, which is already demonstrating that it's looking for alternative GPU providers.

I think now is a lucrative time to buy AMD stock and prepare to hold on tight.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.